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July 17, 2026

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Forest City’s Network School says US$122m investment plan on hold amid Malaysia’s probe into alleged Israeli link

Locals in Johor’s Forest City tell CNA the startup community has boosted businesses but add that anyone found breaching Malaysia’s immigration laws should face action.

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ISKANDAR PUTERI, Johor: The founder of Network School, a startup community based in Johor’s Forest City, says the organisation has put on hold any further investment in Malaysia and a planned RM500million (US$122 million) expansion after authorities launched a probe into claims that Israeli nationals were among its participants.

Speaking out for the first time on Thursday (Jul 16) since the matter made the headlines this past week, Balaji Srinivasan – the American investor behind the organisation – said there are “two paths forward”, depending on whether Malaysia wants “continued global tech investment” or not.

If Malaysia wants such investment, then he would like to seek a meeting with Prime Minister Anwar Ibrahim to negotiate terms for a memorandum of understanding for Network School to continue its operations and investments in the country.

“Alternatively, if you don’t want our investment, or those of our colleagues at billion dollar funds and trillion dollar companies, we will of course respect your wishes, and reallocate our capital to other countries instead,” Balaji wrote on X, adding that his outfit was “on the cusp of a RM500 million-plus expansion to grow our community”.

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The high-profile probe follows public scrutiny over claims that some participants had entered Malaysia using passports from other countries.

Malaysia, a staunch supporter of the Palestinian cause, bars entry of Israeli passport holders as the countries do not have diplomatic relations. However, it reportedly does not have specific laws barring Israelis from using passports from a second country.

In his statement, Balaji claimed that the Network School had invested over RM100 million in its Forest City campus and employed dozens of Malaysians, directly and indirectly, at every level from executive to staff members.

“We’ve also revitalised the multibillion-dollar Forest City project, causing millions of ringgit in real estate appreciation,” he claimed.

Balaji Srinivasan speaks during a conference in Manhattan, New York City on Sep 14, 2022. (File photo: Reuters/David ‘Dee’ Delgado)

Forest City, located in Iskandar Puteri, has been infamously reported by various media outlets as a “ghost town” – in reference to how the area is largely deserted, with a significant number of residential units unoccupied.

Srinivasan claimed that an “emerging multi-billion dollar success story” risked being derailed by what he alleged to be a “fake story spread by an anonymous account”, referring to an Instagram post on Jul 10 by Malaysian Protest 4 Palestine (MP4P) which has garnered over 72,000 likes.

MP4P, a pro-Palestinian advocacy group, had claimed that Network School has become a “gathering place for Israeli entrepreneurs”, citing Reddit posts in which Israeli citizens had shared ways in which they entered Malaysia to attend the Network School programme in Forest City.

It also alleged that among the screening questions posed to potential participants during admission interview to Network School include topics concerning Israel, military technology as well as politics.

A man walks past a Network School display unit showcasing its workspace concept in Forest City, Johor, on Jul 16, 2026. (Photo: CNA/Zamzahuri Abas)

Earlier on Tuesday, Malaysia’s Home Ministry ordered a probe into Network School, saying that the government will not compromise against any individual or organisation that misuses Malaysia’s immigration facilities or engages in activities that contravene the law and could jeopardise national security, public order or the country’s sovereignty.

This comes after Johor Chief Minister Onn Hafiz Ghazi called for an investigation, adding that he had asked the ministry, Immigration Department, police, Customs Department and other relevant security agencies to investigate the identities and nationalities of those involved with the Network School.

Anwar has also weighed in, saying that the government would expel any Israeli nationals found to be involved in the Network School and that they would be “chased away”.

Local media reported on Thursday that the immigration department had yet to find any evidence that Israeli nationals were present at the Network School.

The department said it had inspected 266 foreigners from 40 countries and found they had valid documents, though further checks were ongoing to ensure compliance with all other entry requirements and related laws.

Balaji said that the school has “cooperated fully” with the authorities, adding that its network members “have nothing to hide”.

“Anyway, at this point, all further investment we were planning to make in Malaysia is on hold until we get sufficient assurance that such issues won’t recur. So are the investment plans of many of our friends, including the execs and investors at global tech firms that we brought to Forest City,” he said.

He added that if Malaysia wants continued global tech investments and aims to be among the top 20 tech hubs, Network School is prepared to discuss a memorandum of understanding with Putrajaya, similar to the one signed recently between the Solana Foundation and the Kazakhstan government.

The Solana Foundation is a Swiss non-profit foundation that signed a deal with the Kazakhstan government in June last year to advance Central Asia’s crypto industry through education and boosting startups.

Under such an agreement, Balaji said, Network School would publicly commit to abiding by all Malaysian laws and respecting the country’s sovereignty.

CNA has reached out to Malaysia’s Prime Minister’s Office, Home Ministry as well as MP4P for comment.

A Network School sign is seen in Forest City, Johor, on Jul 16, 2026. (Photo: CNA/Zamzahuri Abas)

REACTIONS FROM FOREST CITY RESIDENTS, WORKERS

While investigations are ongoing on the Network School, the presence of the “digital nomad” community has brought about brisk business and has largely had a positive impact on an otherwise mostly empty and deserted town, said residents and workers in Forest City interviewed by CNA.

Still, they maintained that if members of the community were found to have contravened Malaysia’s immigration laws, they should be punished accordingly.

When CNA visited Forest City on Thursday and spoke to the development’s officials on the ground, they explained that the community was based across two parts of the development.

One is a co-working space which hosted offices and working booths, and the other the Forest City Marina Hotel, where members were staying and had access to the Network School cafe located at the hotel lobby.

When approached, a representative for Network School declined comment, and instructed CNA to leave the premises, saying that it was a “private area for members only”.

Members of the Network School also declined comment. There were roughly 30 members seen at the Network School cafe when CNA visited on Thursday morning.

Norhayati Hashim, a cashier at an eatery located about 50m from the Network School co-working space, told CNA that around a dozen of the members would patronise her establishment each day.

“They speak English, and they are mainly Caucasians … we can’t tell if they’re Israeli or not. But they are alright, they help bring in business. Because of them our business has improved 10-20 per cent over the last few months,” she added.

A Network School workspace is seen in Forest City, Johor, on Jul 16, 2026. (Photo: CNA/Zamzahuri Abas)

An employee who works at a Maybank branch adjacent to the Forest City Marina Hotel told CNA that he was shocked after reading recent reports about the Network School.

“The members do use Maybank services to draw money or remit money, but there has been no (proof) that any of them are Israeli citizens,” the employee said.

“When we process their documents, we don’t see any Israeli passports, but according to some reports they may be using other passports so that may be a loophole,” the employee added, saying that they would be legally required to report the matter if they came across identification from any clients showing they were Israeli citizens.

Muhammad Syafiq Abu Bakar, a Malaysian who is currently renting an apartment in Forest City, told CNA that he has noticed the Network School members being around for more than a year.

“They have not disturbed residents, we see them patronising cafes and restaurants which were otherwise abandoned,” said the 29-year-old who works at the nearby Tanjung Pelepas Port.

“Recent reports have made the school quite curious, if indeed they are Israeli amongst them they should be sent back, as (Prime Minister Anwar) said. We don’t want another Nas Daily incident, it’s quite shameful for Malaysia if they restrict Israelis but they are still here,” he added.

Syafiq was making reference to an incident in October 2025 when Israeli vlogger Nuseir Yassin, also known as Nas Daily, sparked controversy after appearing in a video filmed in Johor promoting Network School, local news outlet the New Straits Times (NST) reported.

The video, which featured Johor landmarks and views of Singapore, has since been removed.

An American entrepreneur who moved into Network School earlier this year told NST that the school’s collaborative environment had helped her grow professionally while giving new life to Forest City, which was once criticised for its low occupancy.

Nourah Smith, 28, said that the startup had operated legally and should not be judged based on the nationality of a handful of people.

“Judge the person, not the passport,” Smith told NST, adding that members respected local laws and customs during their stay in Malaysia.

NST added that she was one of more than 260 foreigners living in the purpose-built community in Forest City, paying US$1,500 to US$3,000 a month for accommodation, meals and access to facilities and activities such as lectures, hackathons, coding workshops, language classes and wellness programmes.

Launched in 2024, the project is linked to Srinivasan’s idea of a “network state”, a digitally connected community that can eventually establish physical settlements with their own social and economic systems, reported Free Malaysia Today.

Source: CNA/ia(as)

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